EUR/GBP rises toward 0.8800 following UK CPI, Germany’s IFO Survey data awaited

EUR/GBP appreciates following the release of weaker UK Consumer Price Index data.
UK headline CPI rose 3.2% YoY in November, below forecasts but above the BoE’s 2% target.
Traders shift their focus toward Germany’s IFO Business Survey and Eurozone core HICP data due later in the day.

Akhtar Faruqui FXStreet

EUR/GBP recovers its recent losses from the previous session, trading around 0.8780 during the European hours on Wednesday. The currency cross gains ground as the Pound Sterling (GBP) declines following the release of weaker Consumer Price Index (CPI) data from the United Kingdom (UK) for November.

The UK headline CPI rose 3.2% year-over-year (YoY) in November, above the Bank of England’s (BoE) 2% inflation target. Markets predicted a 3.5% growth in the reported period against the rise of 3.6% in October. Meanwhile, the monthly UK CPI arrived at -0.2% in November, versus a rise of 0.4% reported in October.

The UK core CPI (excluding volatile food and energy items) rose 3.2% year-over-year (YoY) in the same period, compared to October’s 3.4% print and came in softer than the forecast of 3.4%. The annual Retail Price Index came in at 3.8% in November, against the expected and previous reading of 4.3%.

Weaker data reinforced the dovish expectations that the Bank of England (BoE) will cut interest rates by 25 basis points to 3.75%, the lowest since 2022, as rising unemployment and economic stagnation ease inflation pressures.

Traders will likely watch Germany’s IFO Business Survey, followed by Eurozone core HICP data later in the day. The Euro (EUR) gains ground as investors scale back European Central Bank (ECB) easing expectations after officials signaled further cuts may not be needed in 2026.

Economic Indicator

Consumer Price Index (YoY)

The United Kingdom (UK) Consumer Price Index (CPI), released by the Office for National Statistics on a monthly basis, is a measure of consumer price inflation – the rate at which the prices of goods and services bought by households rise or fall – produced to international standards. It is the inflation measure used in the government’s target. The YoY reading compares prices in the reference month to a year earlier. Generally, a high reading is seen as bullish for the Pound Sterling (GBP), while a low reading is seen as bearish.

Why it matters to traders?

The Bank of England is tasked with keeping inflation, as measured by the headline Consumer Price Index (CPI) at around 2%, giving the monthly release its importance. An increase in inflation implies a quicker and sooner increase of interest rates or the reduction of bond-buying by the BOE, which means squeezing the supply of pounds. Conversely, a drop in the pace of price rises indicates looser monetary policy. A higher-than-expected result tends to be GBP bullish.

Author

Akhtar Faruqui

FXStreet

Akhtar Faruqui is a Forex Analyst based in New Delhi, India. With a keen eye for market trends and a passion for dissecting complex financial dynamics, he is dedicated to delivering accurate and insightful Forex news and analysis.

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